Circuit City to Sell Credit-Card Business to Bank One

TBO ^ | 1/20/04

[Tumbleweed_Connection]

Va. (AP) - Circuit City Stores Inc., the nation's No. 2 consumer electronics retailer, will sell its private-label credit-card business to Bank One Corp. for $1.8 billion in cash.

Circuit City said Tuesday that it is shedding the credit-card operation so it can focus on renovating and relocating aging stores, as well as opening new outlets. In November, the retailer sold a bank-card portfolio to FleetBoston Financial for $1.3 billion.

The upcoming sale "further simplifies the investment picture for Circuit City shareholders and allows us to focus our attention on the needed improvements in our retail business," said W. Alan McCollough, the company's chief executive officer, in a statement.

As part of the deal, Chicago-based Bank One will compensate Circuit City for new credit-card accounts and provide special financing terms for the retailer's customers.

When the transaction closes between April and June, Bank One will assume control of the credit card operation, which includes 700 employees in Atlanta and Richmond.

FleetBoston, however, has decided against retaining 300 employees at both centers, Circuit City spokesman Bill Cimino said. Those workers were informed several months ago that they will be let go after the transition is complete. They will be offered severance packages and job assistance, he said.

Circuit City anticipates that its relationship with Bank One will generate annual pretax earnings between $27 million and $30 million. That's similar to the finance income it would generate if it retained the private-label finance operation.

Circuit City expects to incur an estimated after-tax loss of $10 million, or about 5 cents per share, mostly because of transaction-related expenses. Most of the charges will be taken in the company's fourth and first quarters.

Bank One anticipates that the transaction will boost earnings slightly in 2004.

Shares of Circuit City were up 78 cents, or more than 8 percent, to close at $10.35 on the New York Stock Exchange while Bank One shares were down 13 cents to close at $50.87.

[Mark was here]

...and Bankone is being bought by Morgan Chase. I had a credit card that was bought by Chase and they jacked up the intrest rate for no other reason but to see if I noticed.

[Eric in the Ozarks]

Circuit City--run by incompetents who not only know nothing, they suspect nothing.
They are headed for the dust bin of history.

[Azzurri]

Chase Bank is the biggest scum in the credit card market. Same thing happened to me, they jacked an interest rate for no reason until I challenged them. Too late, I told them, you tried to screw me so I closed the card. My only credit card now is Bank One. Now you're telling me they are being bought out by Chase! Oi vey!

[Eric in the Ozarks]

I felt the same way about the GM card. A woman called me at 9:45pm about missing a $45 minimum payment on $1800 I had on the card.
I paid that puppy off the next day and sent a strong letter suggesting what they might do with the piece of plastic. Five years later, they're still send me "we want you back," letters which I mail back in the enclosed postage-paid envelope.
The a**holes !

[Future Snake Eater]

Wow, so Circuit's selling ol' FNANB, eh? I wonder if the joyless employees have to produce any more credit card sign-ups like I had to for so long...

[Amelia]

Circuit City--run by incompetents who not only know nothing, they suspect nothing.

Really? Our local Circuit City employees are more knowledgable and helpful than those at Best Buy, plus, Circuit City will often negotiate prices - Best Buy won't.

[Eric in the Ozarks]

The Wall Street Journal printed a story a few months ago about Circuit City management, looking for ways to cut in-store costs. Since all sales people at Circuit City are 100 percent commissioned, they picked out their top sales people and fired them because they were making too much money.
Can you imagine your local Ford dealer discharging his top salesman because he sold too many F-150s ? Circuit City's stock, compared to Best Buy's, in in the tank and BB is opening stores where CC is retreating.
Glad you got a good deal.

[Amelia]

Since all sales people at Circuit City are 100 percent commissioned, they picked out their top sales people and fired them because they were making too much money.

If they're 100% commissioned, that explains why they are so much more attentive and helpful than those at Best Buy...but you're right, firing the best ones was a stupid move.

[Eric in the Ozarks]

Would you invest in CC stock ?

[Eric in the Ozarks]

How'd you like to work for a company like this ?

[Amelia]

If you're correct, no, I wouldn't want to work for them or buy their stock. If the management is so stupid as to fire the best salespeople, they're doomed.

That doesn't mean I won't continue to shop at the local one, so long as I get better service and prices than BestBuy...and notice I put service first.

[Eric in the Ozarks]

Service is everything. I'd drive a Studebaker if the dealer backed them.